The internal labor markets of business groups

Abstract

This paper provides novel micro evidence of labor mobility inside business groups. We show that worker flows between group firms are significantly more prevalent than between unaffiliated firms. We also find that groups respond to changing business conditions by reallocating top-occupation workers across affiliated firms. The wages of top workers increase as they move within the group. Internal labor reallocation is stronger when the worker's origin firm controls the destination firm and in more complex hierarchical structures. Our results are consistent with the hypothesis that groups ease the transfer of intangible inputs, such as management practices, across firms.

Ownership networks and labor income

“…The recent literature on business groups has also pointed out that internal labor markets can be a source of competitive advantage (see Tsolmon 2016, andFaccio andO'Brien 2021). For example, business groups can ease the reallocation of top workers to booming sectors and firms (Huneeus, Larrain, Larrain, and Prem, 2021). Our study showcases another dimension of the interaction between business groups and labor.…”

Ownership Networks and Labor Income

“…The recent literature on business groups has also pointed out that internal labor markets can be a source of competitive advantage (see Tsolmon 2016, andFaccio andO'Brien 2021). For example, business groups can ease the reallocation of top workers to booming sectors and firms (Huneeus, Larrain, Larrain, and Prem, 2021). Our study showcases another dimension of the interaction between business groups and labor.…”

The limits of hegemony: U.S. banks and Chilean firms in the Cold War

“…Moreover, 40% of firms were affiliated with the largest business groups in 1970. 4 Therefore, any shock experienced by firms in our data could have propagated to other firms and the rest of the economy through production networks and within business group dynamics (Acemoglu et al, 2012;Huneeus et al, 2021).…”